Federal Dollars Fuel State IT Buying

Sep 10, 1998

Washington Technology Online - Eye on the States

Federal Dollars Fuel State IT Buying

The federal government has financed many of the largest information technology programs in state and local government in recent years. Indeed, it is difficult to envision how state and local governments could cost-effectively deliver services such as health care, public safety and human services without federal support.

Most federal financing of state and local government takes the form of grants. These grants range from enormous, all-encompassing health and welfare allocations to small grants providing local matching, planning and demonstration funds. Whatever their size or nature, each grant contains guidelines for technology projects and subsequent procurements.

Currently, revenue from the federal government represents almost a quarter of state government revenues and about 16 percent of total state and local government revenue. According to a new national grant-tracking database, there are several hundred separate technology-related grants disseminated by the federal government. The grant amounts range from over $100 billion annually for Medicaid to $35,000 for research on oceanographic database management.

One of the largest targets for grant funding is in the human services arena. These grants have grown and evolved over the years reflecting changes in overall social welfare policy. The latest iteration, the Personality Responsibility and Work Opportunity Reconciliation Act of 1996, allows state and local governments greater flexibility in how and where they use the funding.

As a result, innovative programs have sprung up in the states with the ultimate goal of reducing welfare case loads and moving recipients into jobs. By scouring state budgets and grant allocation lists, it is possible to uncover the seeds of numerous IT projects.

One of the largest grant sources is the U.S. Department of Health and Human Services, which provides much of the funding behind the engine of welfare reform. Estimated fiscal 1998 budget allocations from the HHS Administration for Children and Families for grants, direct payments and discretionary funds exceed $36 billion. The funding supports the primary human services programs in state and local government.

HHS funding trickles down to state and local governments for direct services, program administration and technology. One example of this can be found with the new block grant for child care, which is proving to be one of the most important programs for moving people off welfare and into jobs.

Child care grants provide the funding needed to make child care more accessible to low-income families. The fiscal 1998 grants from HHS for child care-related programs total just above $3 billion, about 8 percent of the total grant funding from the Administration for Children and Families. Just over $1 billion of that was allocated to state governments via the Child Care and Development Block Grant. The other $2 billion was funded through the child care mandatory and matching funds of the Child Care and Development Fund.

The Child Care and Development Block Grant is used to increase the availability, affordability and quality of child care and to increase the availability of early childhood development. Child Care and Development Block Grant funding must be used in the following ways:

At least 25 percent of the funding must be used for early childhood development, before- and after-school programs, and quality improvement activities.

The remaining 75 percent of the funding must be used for direct child care services and quality improvement activities.

With this funding states must now oversee large child-care programs and also comply with federal reporting requirements. To do this, states need to develop integrated child-care systems. Several states are planning either to upgrade their current systems or develop new systems to track child care within their state.

California, for example, currently has more than 300,000 children in subsidized child care and the state is planning to develop a system that will collect and maintain data on:

The accessibility of care

The service providers

The agencies involved

The costs associated with providing care

Using federal grant money, the state is now studying options to implement the new child care tracking system.

Although devolution changes the rules governing the use of federal dollars, the overall financial dependency of state and local governments on the federal government - especially for technology programs - continues unabated. Thus, tracking the flow of federal grants to the states will continue to provide companies with the market intelligence they need to stay ahead of the competition.

Thomas R. Davies is vice president of Federal Sources State and Local Government Consulting practice in McLean, Va. David DeBrandt provided research support.

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